The Political Poison of Vested Interests

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Once vested interests take control, the only possible "solution" left is collapse.

I have long identified diminishing returns as a key dynamic in the current unraveling of the Status Quo. Why is this so? We can summarize diminishing returns as dumping more money, capital, energy and effort into a system just to keep the output from falling to zero.

But as the costs of keeping the system from imploding rise, they soon consume all the oxygen in the system, and the system implodes anyway.

The Fatal Disease of the Status Quo: Diminishing Returns (May 1, 2013)

Our Era’s Definitive Dynamic: Diminishing Returns (November 11, 2013)

Sickcare, higher education and insanely expensive weapons systems are all examples of this dynamic. The higher education cartel has raised gargantuan sums to fund its poor quality product by turning students into debt-serfs via student loans.

We must add a second definitive dynamic: protecting vested interests. There are many ways of describing powerful constituencies with an enormous stake in maintaining the Status Quo--vested or entrenched interests, for example--but the key characteristic is the enormous political pain that these groups can inflict on self-serving politicos.

Once confronted with an aroused vested interest--public union, cartel, corporatocracy, Power Elite, etc.--politicos cave in and do what is politically expedient: avoid any real reform and simply shovel more money into the gaping maw of diminishing returns.

A good example is soaring higher education costs and the decline of actual learning and the real-world value of a college diploma. The long-term study Academically Adrift: Limited Learning on College Campuses concluded that "American higher education is characterized by limited or no learning for a large proportion of students."

But rather than enable (or even insist) on real reforms that dramatically lowered costs and improved results, the political Status Quo responds to the higher education cartel's screams for more money by extending more student credit and taxpayer-paid aid to the cartel.

(I address all these issues in my book The Nearly Free University and The Emerging Economy: The Revolution in Higher Education.)

Once politicos respond to the cries for more money and protection from diminishing returns from vested interests, the real problem festers, unsolved and addressed, while the politically expedient "solution" drains resources away from real reform and exacerbates the underlying problem.

You see the end-game this cycle of vested interests and political expedience creates: as the real problems go unaddressed, they further diminish returns, which triggers even more frantic calls by vested interests for more funding and more protection from the creative destruction of diminishing returns.
Meanwhile, the opportunity cost of supporting diminishing-return vested interests continually increases as scarce resources are squandered on supporting entrenched interests.

Eventually the parasitic entrenched interests have consumed all the oxygen in the system and the system collapses under its own weight.

In a political system where money buys concentrated political power, decisions that affect 100% of the populace are made to benefit the 5% most powerful entrenched interests. How can wise decisions be made when all decision-making centers around placating politically dominant interests? Answer: they can't. Decisions made to protect and favor the few at the expense of the many are intrinsically unwise, as they are blind to the consequences heaped on the voiceless 95%.

Vested interests span the entire political spectrum. The "progressive" favorites, banking, higher education, public unions and sickcare, are all able to veto any reforms that threaten their share of the swag or that demand higher returns on the ever-rising sums poured into these systems.

The "conservative" favorites, banking (every politico is beholden to financial Elites), weaponry, energy, and corporate welfare, are equally able to squelch reform that threatens their share of the swag.

Combine diminishing returns with the political dominance of vested interests and you get a system incapable of reforming itself and incapable of stopping the slide off the cliff. Vested interests have no concern for the unintended consequences of their self-aggrandizement; the entire poilitical structure is based on the faith that there is always more money to feed the insatiable hunger of entrenched interests for more funding, more protection and more power.

That there might be limits that cannot be surpassed without imploding the entire rickety, corrupt system is a danger that cannot be recognized, much less discussed in the halls of power, lest the faith that unwise decisions and spending can pile up year after year and decade after decade forever be questioned.

And so the only possible "solution" left is collapse. This is the lesson of the book The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization, which illustrates that the solution has always been collapse when corrupted, self-serving vested interests gain control of the political system and the economy.

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Deathrips's picture

If you are dependent on these need choices. Independence now!!



SamAdams's picture

This graph is approaching a stall condition.  You know what happens after a stall right?  Going to need full rudder and work the flaps hard to save this one.

agstacks's picture

Escape velocity,  right?  ;)

detached.amusement's picture

more like "vortex ring state"



except the pilots flying this helicopter dont appear to have ever been warned about it, or how to get out of it, or the fact that moar power to the engines means reinforcing the ring state.

ZerOhead's picture

Hopefully one detects the shuddering that occurs just before the stall.

Failing that you've got to give her full gas (QE) and nose her to the ground to generate some airspeed and hope o hell you were high enough (time for effect to work) to recover controlled flight (sustained organic GDP growth).

Failing that it's "game over".

So I guess by judging the GDP increases to the amount of deficit spending and QE injections ... it's pretty much "Game Over".

seek's picture

It must be working, because everything it getting bigger when I look out the window!

samsara's picture

''Hopefully one detects the shuddering that occurs just before the stall.''

That will be done on an individual by individual basis. The 'whole' won't notice it or we would be at stall speed to begin with.

If you didn't feel the 'shudder' (or the audible 2 minute warning) You and your family will crash with the plane.

drendebe10's picture

...doom and gloom, doom and gloom yet things keep muddling along while the uberwealthy get richer and richer and richer, the sap middle class and poor (except those with gummint freebies) get poorer and poorer and the ruling elite get to live grand imperial obscene golf life styles at tax paying serf and peasant expense...   karma justice is always a no show when we need it...

samsara's picture

I would highly recommend Dr. Seuss's best book on why socialism doesn't work in only the way that Dr. Seuss can. It will drive home your point to an eight year old, (and even adults will painfully see it also)

Get a copy for every kid you know. Let them read it. Let them see what happens. GREAT BOOK for the little ones to understand.

Thidwick the Big-Hearted Moose

Stoploss's picture

Forgot to tag it the Clinton youth welfare program, there in '95.   My how it has done so well!

They graduate right into this!

disabledvet's picture

diminishing MARGINAL returns...which makes this article even MOAR spot on.

In other words...and I know this will go over like a lead balloon...but the Fed DID do the right thing in 2008...not just to save themselves..but to save what little is left of the US economy.

In short "there still is a US economy" which is surprising to say the least.

The problem as all economists like to point out is "at the margin"...meaning where demand meets supply.

If there is no marginal demand ("consumer is terminated") then by definition prices must fall to "capture" said lost demand. That would include...indeed HAS included the price for DEBT. (Detroit was but one year ago folks.)

And now we wish to return to our "golden age of QE"?

I think getting the "purging cycle" after the "binging" over with...while clearly not healthy over the long term...may be what we're gonna get anyways. So someone called an audible last Spring and the Fed "went for it" that's fer sure.

So now the "good debt" (treasuries) drives out the "bad." (every...other...asset...on...the....face...of...the...planet.)

Putin going apeshit didn't take long did it!

Clearly no one is doing the "right" thing...but the necessary thing might be getting done here.

Of course ultimately these are all Government decisions as pretty much everyone has thrown their hat in with the US "war effort" people. That includes the totality of Wall Street.

They have less of a clue as to why the equity market is soaring than Zero Hedge does.

the technical term is a "crowding out effect" where the need to continuously create more debt to "get demand moving" causes demand instead to suddenly falter...if not totally collapse.

The Federal Government is not going to wait around for "another 2008." They will cease the existence of New York City itself if that's what it takes to "stop the cycle" of binging and purging "and war with Russia would do just that."

samsara's picture

And onwards to perpetual Growth Too I would assume?

detached.amusement's picture

stopped reading at "the fed did do the right thing in 2008"

Dollarmedes's picture

Bust up the banks, then bust up the federal government. Eliminate the concentration of power.

rosiescenario's picture

Generally Charles Hugh-Smith writes well and is on point with his articles (meaning I agree with him).


This article really falls short...sure, what he mentions is correct, but the biggest problem right now (aside from our economy) is what we are doing in foreign countries and I would say we are doing it purely for a variety of special interest groups at a cost to the U.S. citizen and our economy.


If we had not been supporting Israel, we would not have had 911. We have no need to be in any of the ME countries except it benefits big oil and Israel. If you are running for office and wish to ensure you are not elected, say something bad about Israel....the press will kill you. Israel, as a special interest group, always gets its way in D.C. no matter how bad the result is for the average U.S. citizen. I am not pro or anti Israel....that is just a fact and one example of the power of special interest groups.


You might also ask, just who benefited from Obamacare? As far as I can tell, I now pay more for less coverage to the same insurance company. The cost for prescription drugs has been raised and my co-pay has gone up. Obviously, there are 2 clear winners with Obamacare, but not one citizen that I know of.


In looking at all of our supposed "regulatory" agencies, there does not appear to be one of them that is not controlled by one or another special interest group. Our USDA gave Monsanto carte blanche with GMO seed. The FDA has never addressed the issue of mercury in vaccines because the largest pharma companies might face enormous liability. The FTC has not enforced any price fixing actions against the companies that were rigging the SWAP market by fixing prices....ditto for the TBTF Banks rigging LIBOR. ....and then there is the SEC...DOJ...the list of our captured regulatory agencies appears to be all inclusive.



ebworthen's picture

Unsustainable, but that's where TPTB seem to want things.

Almost as if they are planning another collapse, and a bigger collapse.

billw's picture

Hey Charles,

How about a little intellectual honesty? I guess you believe that if you run down both sides of the political spectrum it proves you are fair minded. All it really proves is that you too are unwilling to do what it takes to solve the issues. On the so called conservative side their "vested" interests were the only ones taking real decreases during the sequester. Obama has funneled billions upon billions of dollars to the environmentalists ( think solar panels and wind turbines) most of which has gone bankrupt. But you did not see any of his donors going to jail for ripping off the American people. Warren Buffet has gotten richer because his railroad is carrying all of that Canadian oil instead of the Keystone pipeline being built and providing jobs for Americans. George Soros has used his insider status to allow him knowledge allowing him to double his wealth in the last 5 years. Harry Reid has a hand in dealings with the Chinese solar panel industry. These are just a small fraction of how the vested interests of the progressives are feeding on the carcass of the American people.

spooz's picture


Billions and billions to environmentalists? Pretty sure the support they get is in the millions. The biggest corporate welfare recipients are Boeing ($13.2 billion), Alcoa ($5.6 billion), Intel ($3.9 billion), GM ($3.9 billion) and Ford ($2.5 billion).  Maybe you should do a little research instead of just repeating propaganda soundbites.

Oh, and Warren Buffet's Berkshire Hathaway is #15 on the list, with 310 corporate subsidies totalling $1.1 billion.

detached.amusement's picture

you need to do a little more much you think the government(s) have spent on AGW alone, nevermind everything else?  BillionS. S.

damicol's picture

enormous political pain that these groups can inflict on self-serving politicos.

Once confronted with an aroused vested interest--public union, cartel, corporatocracy, Power Elite, etc.--politicos cave in and do what is politically expedient: avoid any real reform and simply shovel more money into the gaping maw of diminishing returns.

 You missed the most evil corrupt lying filthy degenerates of all.

The fucking stinking bureaucrats. The most despicable degenerate pieces of shite on the planet.

Scheming lying utterly corrupt to the very core, and stating with a fucking sanctimonious cunt like carney all the way down, these are the real enemy.

When things start to breakdown, hunt them down and , kill every fucking one of them and every fucking piece of shit from their loins Eradicate their genes, because these are the most evil poisonous dangerous bastards anywhere.